The tax proposal unveiled by House Republicans this week is a scam.
Americans for Tax Fairness sums it up perfectly: “The Trump-GOP tax plan is not tax ‘reform,’ but massive tax cuts for the wealthy and corporations that will jeopardize Social Security, Medicare, Medicaid and education.”
To the list of national needs that would be woefully underfunded, I would add cutting-edge research and development, critical environmental cleanup and a first-class, 21st Century infrastructure. This is because the GOP tax plan will deprive the federal treasury of $2.4 trillion over the next decade. And the federal deficit will increase by at least $1.5 trillion.
Republicans always complain about deficits except when they are creating them. Reagan’s massive red ink caused George H.W. Bush to raise taxes. George W. Bush’s performance was even worse. Funny how conservatives have amnesia about the Great Republican Recession of 2008: They offer the “tax cuts for the wealthy, low or no wage growth, and deregulation of Wall Street” recipe once again.
Here are some facts that you will never hear on Fox or right-wing radio, and that are often ignored by others:
Conservatives are fond of repeating that U.S. corporations pay a 35% tax rate. But the nonpartisan Government Accountability Office (GAO) tells us that the effective tax rate is much lower. In fact, companies that make a profit pay an effective rate of 14%.
And the Trump/GOP “reform” does not close corporate loopholes or eliminate tax havens!
In March, The Institute on Taxation and Economic Policy reported: “Fortune 500 companies hold a record $2.6 trillion offshore, avoiding $767 billion in U.S. taxes.”
The GOP plan would exacerbate this by designing a “territorial tax system,” where Americans corporations pay zero U.S. taxes on profits made elsewhere. This would deprive our treasury of another $90 billion over 10 years, and encourage companies to outsource even more American jobs.
The share of federal revenue from corporations has declined dramatically over the past six decades. Let’s just take the year I was born – 1953 – as a guide. Glance at this chart from the Tax Policy Center. In 1953, corporate income taxes accounted for 5.6% of federal revenue as a share of GDP. Last year, it was 1.6%. Corporate lobbyists and propagandists have really done their work well.
In 1953, individual income taxes accounted for 7.8% of federal revenue as a share of GDP. Last year, it was 8.8%. Hard-working Americans are picking up the tab for hugely profitable corporations that pay less and less.
I keep hearing this conservative mantra that cutting taxes for corporations will spur growth and increase wages. It never seems to happen! This is another “zombie lie” (an apt term coined by Bill Maher). Corporations are awash in money. Their profits are at all-time highs. How are real wages doing? Pretty much flat since 1973. The biggest disappointment in today’s jobs report (85 consecutive months of private-sector job growth and unemployment at a 17-year low under the current corporate tax code that Republicans find so onerous): stagnant wages. They are well below what is needed for a healthy economy.
Republicans also mislead by labeling their plan as a “small business tax cut.” Not true. From Americans for Tax Fairness: “Less than 14% of pass-through business owners will get a tax cut from the new top 25% rate, as everyone else already pays that rate or less.”
On individual taxes, the scam continues. I offer two key points from Americans for Tax Fairness:
Trump-GOP repeals the deduction for state and local taxes (SALT), raising taxes on the middle class and undermining local public services.
Repealing SALT would raise $1.3 trillion over 10 years. Taxpayers can deduct state and local property taxes, and either income or sales taxes, from their federal taxable income. Over a third of taxpayers making $50-75,000 use the SALT deduction, and over half of those making $75-100,000.
An average family in this last group would see their federal taxes jump by $1,800 if SALT is repealed. In addition to boosting middle-class taxes, repeal of the SALT deduction will make local taxation more expensive, putting pressure on localities to cut budgets for services like roads and schools.
Trump-GOP pulls a bait-and-switch with tax provisions working families rely on, increasing the standard deduction while eliminating the personal exemption, ultimately leaving many families worse off.
Taxpayers who don’t itemize their deductions (which under the Trump-GOP plan may be limited to charitable contributions and mortgage interest) can take a standard deduction from their reportable income. The plan would roughly double the standard deduction to $12,000 and $24,000, losing $830 billion. At the same time, the plan repeals the personal exemption, which reduces reportable income by $4,050 this year for each member of a household. This would increase taxes on individuals by $1.6 trillion, many in the middle-class and especially on large families, nullifying the benefit of the increase in the standard deduction.
Click here for more from the Center for American Progress on how working families will lose out under this GOP plan.
This proposal stinks.
America’s wealth gap is bigger than ever (read today’s story at CNN Money) and this Republican tax scam – where the richest 1% will get 53% of the total tax cuts next year and 80% of the total tax cuts over the next decade – will widen the chasm. Income and wealth inequality will increase. Trump is trampling on his own working-class supporters.
Please do everything you can to stop this terrible bill. History tells us that you do not build an economy from the top down, but from the bottom up and the center out.